Starbucks Most Exposed to Coronavirus Losses, Analyst Says

Starbucks has the most exposure to losses from the deadly coronavirus in China, an analyst says, followed by McDonald's and Domino's Pizza.
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Starbucks (SBUX) - Get Report has the most exposure to losses from the deadly coronavirus in China, an analyst from Guggenheim Securities said Monday, followed by McDonald's (MCD) - Get Report and Domino's Pizza (DPZ) - Get Report.

Starbucks was down 3% to $89.25, McDonald's slipped nearly 1% to $209.24. Domino's was up slightly to $286.57.

Analyst Matthew DiFrisco said in a note to investors that he also sees the risk that out-year growth goals could be impaired as new store development could be disrupted.

"We anticipate the travel restrictions and heightened awareness relating to the coronavirus will disrupt consumer behavior in the near term and adversely affect consumer demand, inclusive of restaurant spending in the region," he said.

China confirmed 81 deaths and more than 2,800 cases of the virus, but warned its incubation period could be as long as 14 days, complicating efforts to screen and detect those who may be potentially carrying the virus.

"China represents a high growth region and a meaningful contributor to the longer-term global revenue growth goals for all three companies," DiFrisco said. "Lastly, the Chinese New Year celebration, which spans from January 25 to February 8 this year, has historically been accompanied by strong consumer demand during the celebration, and thus there could be lost demand."

DiFrisco said he was leaving his estimates unchanged, but was awaiting updated management guidance within the context of the upcoming earnings and conference calls.

Starbucks has closed all shops and suspended delivery services in China’s Hubei province for the week-long Lunar New Year holiday, Reuters reported, where the outbreak originated from its capital Wuhan.

The Seattle-based company operates about 4,275  stores in 168 cities in mainland China, with over 57,000 employees, according to the Starbucks China website. McDonald's, which has been closing stores in China, has about 3,300 locations, while Domino's has roughly 270 stores.

Separately, global companies including Honda and Groupe PSA are evacuating workers from areas of China hardest hit by a deadly viral outbreak, Bloomberg reported. Theme park operators, retailers and restaurant chains are suspending or curtailing
operations to protect workers and limit the spread of the deadly virus.

Nissan  (NSANY) plans to evacuate most of its expatriates and their family members from Wuhan using a chartered plane dispatched by the Japanese government, Bloomberg said.

Starbucks is scheduled to report earnings on Tuesday, while McDonald's will report on Wednesday. Domino's is slated to report earnings on Feb. 20.